Speaker 1: This is Bloomberg Business Week. I'm Carole Masser and I'm
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Speaker 1: YouTube search Bloomberg Global News. Let's set your business week
Speaker 1: agenda on, folks. Could be another interesting week. It's already
Speaker 1: a downward tone when it comes to the trade. So
Speaker 1: let's talk about it with Creedy Gupta, anchor and markets
Speaker 1: correspondent at Bloomberg. She is in our Interactive broker studio
Speaker 1: here at Bloomberg Headquarters. Juda Martin Adams, chief equity strategist
Speaker 1: of Bloomberg Intelligence. I've been going through her research. She
Speaker 1: is on the phone in New Jersey. We're going to
Speaker 1: get to her in just a second. Quick though, Creedy,
Speaker 1: let's talk about the trade today because it did seem
Speaker 1: like tech tried to rally earlier on. It did attempt
Speaker 1: um big emphasis on the word attempt um, but but
Speaker 1: it's still you are seeing some outperformance here. Take a
Speaker 1: look at this, the NASTAC down four tenths of one percent.
Speaker 1: Compare that to what you're seeing the SMP broadly, which
Speaker 1: was down about one percent at the session load. So
Speaker 1: you do see an attempt here. What's interesting to me,
Speaker 1: and I think we're pretty much just off session load,
Speaker 1: so we are, But I think what's crucial about the
Speaker 1: tech outperformance or relative outperformance I should say, is take
Speaker 1: a little at what's happening in the bond market. This
Speaker 1: kind of rate sensitivity, this currency sensitivity. We're so used
Speaker 1: to hitting the tech space. You're not seeing that today.
Speaker 1: In fact, the two year yield um came and you
Speaker 1: had an auction this morning, nobody or this afternoon, sorry,
Speaker 1: nobody wanted to hop into this trade. In fact, it
Speaker 1: tailed and the tenure yield got a lot more volatility.
Speaker 1: So twenty basis point move on the ten yure yield
Speaker 1: and we have yield still higher, the dollar gets even stronger.
Speaker 1: That technically should create a feedback loop into stocks broadly,
Speaker 1: and I think that's what you're seeing here, and that
Speaker 1: doesn't even take into account what's happening across the Atlantic. Yeah,
Speaker 1: I feel like the UK was just you tuned in
Speaker 1: this morning, you read the most read and so much
Speaker 1: of it had to do about the UK. Just quickly,
Speaker 1: what do we need to know about the UK in
Speaker 1: thirty seconds? Well, you need to know is that this
Speaker 1: is the poster or child story for monetary policy and
Speaker 1: fiscal policy. Butting heads is something that I think serves
Speaker 1: as a really big lesson for the United States as
Speaker 1: the federal Reserve tries to hike. Do you want the
Speaker 1: likes of the Biden administration and other state authorities as well,
Speaker 1: trying to give more stimulus in the face of a
Speaker 1: recession in that contradiction that the UK is proving does
Speaker 1: not work. It's tough tim right for so many people
Speaker 1: where this is they're struggling with higher prices and so
Speaker 1: we gonna talk more though about the trade. Yeah, So
Speaker 1: the question is where does one look for return when
Speaker 1: it comes to equities. Gina Martin Adams, chief equity strategist
Speaker 1: for Bloomberg Intelligence. Do you know last week we talked
Speaker 1: about small caps. This week we're talking about hy duration
Speaker 1: and megacap stocks. You and the team have a new
Speaker 1: noe doubt. But it's not essentially saying that they're standing
Speaker 1: out in a good way. It's in a bad way.
Speaker 1: What's going on? Yeah, So when we look at the
Speaker 1: distribution evaluations and five DRED, a lot of great value
Speaker 1: emerged over the course of the sell off in September.
Speaker 1: We're now looking at about seventy stucks the index trading
Speaker 1: below their pre pandemic norm in terms of valuation ratios.
Speaker 1: The equal weighted index is also trading back to its
Speaker 1: pandemic lows in terms of a forward multiple. So very
Speaker 1: clearly opportunities are emerging in the S and P. The
Speaker 1: problem is that those mega cap stocks are still incredibly inflated.
Speaker 1: Their premium is to the rest of the index and
Speaker 1: their hyduration long duration stocks. So that would suggest that
Speaker 1: if interest rates are going to keep rising, they're going
Speaker 1: to continue to have to reprice back to more normalized
Speaker 1: valuation levels consistent with those higher interest rates, and that
Speaker 1: could remain a source of tension in the index. So wait,
Speaker 1: let me just make sure I understand that. So Jinna,
Speaker 1: you said that various measures in terms of stocks multiples,
Speaker 1: it's kind of different variations. Were below pre pandemic valuations, yep,
Speaker 1: So the index actually now trades below its pre pandemic
Speaker 1: average multiple. So we're looking at before the pandemic, before
Speaker 1: the valuation and massive valuation expansion five year average multiples
Speaker 1: pre pandemic, so that level and SMPS five hundred stocks
Speaker 1: are now trading at discount that average. But it's not
Speaker 1: enough what you're saying. They still need to reprice lower. Yeah,
Speaker 1: So what's not enough is the fact so that other
Speaker 1: thirty percent has a lot of the biggest stocks in
Speaker 1: the SMP five hundreds, So the market capitulating the index
Speaker 1: is getting in trouble here where the biggest stocks are
Speaker 1: still premium priced. There's a lot of concentration in those
Speaker 1: biggest stocks. Most investors own them and are overweight them.
Speaker 1: The result of that is they're hanging onto these stocks
Speaker 1: that it should be repricing with the rest of the index.
Speaker 1: So that creates a lot of turmoil for the index
Speaker 1: at large. You know, if you're still hanging onto stocks
Speaker 1: with a duration that is bigger or longer than the
Speaker 1: rest of the SMP five hundred In an environment where
Speaker 1: interest rates are going higher, you're probably mispositioned and the
Speaker 1: index at large is still at risk of correction. Did
Speaker 1: you know, very briefly, what about when it comes to
Speaker 1: when we start to hear from these companies and then
Speaker 1: we see do we see in some sort of other reset, because,
Speaker 1: after all, for better for worse, this quarter is over
Speaker 1: this week. Yeah, I think that we do want to
Speaker 1: look forward into October's earning season. It's a bit early
Speaker 1: to do so yet, as we're still trading clearly on
Speaker 1: macro um. You know, the interest rates are the biggest
Speaker 1: driver of equities still, with utilities and real estate stocks
Speaker 1: trading off today by the most among sectors in the
Speaker 1: SMP five hundred. Nonetheless, I do think we want to
Speaker 1: look forward to the earning season and start to sort
Speaker 1: of handicap the prospects for earnings to come in probably
Speaker 1: a little bit better than anticipated, given the insulationary backdrop
Speaker 1: and the relatively steady economic indications that we're getting. As
Speaker 1: much as the market is in turmoil with this interest
Speaker 1: rate reset, the economy has been relatively resilient, suspiciously resilient,
Speaker 1: and inflation is still pricing power is still somewhat intact
Speaker 1: for many of these companies, so earning season could be
Speaker 1: pretty meaningful. Got to be quick twenty seconds. I gotta
Speaker 1: ask you. We're talking about there's a story in the
Speaker 1: Blueberg about investors sitting on five billion dollars worth of cash,
Speaker 1: you know, ready to put to work. Does that factor
Speaker 1: in it all in terms of how you think about
Speaker 1: the outlook in really quickly, Gina, yeah, not tons. I mean,
Speaker 1: you know, there's always a decent amount of cash on
Speaker 1: the sidelines, and frankly, for the first time in a
Speaker 1: long time, you're gonna get paid to hold some cash.
Speaker 1: The competitive landscape is very different today than it was
Speaker 1: in yours pass the c D back in fashion. Who
Speaker 1: would have thought, alright, guys, we get it wrong. Thank
Speaker 1: you so much. Critykopta, anchor and markets correspondent at Bloomberg,
Speaker 1: along with Gina Martin Adams of our Bloomberg intellent. That's
Speaker 1: certificate of deposit, not compact disc By the way, we'll
Speaker 1: walk around our global cities and you're likely to see
Speaker 1: a common denominator among them. It's all in a story
Speaker 1: that is among our most read today on the Bloomberg
Speaker 1: terminal It's also happens to be the Bloomberg Big Take,
Speaker 1: and it's about New York City's empty offices and their
Speaker 1: reveal of a global property dilemma. The story written by
Speaker 1: Natalie Wong, John Getlsen and Noah Boo Hire. Natalie Wong
Speaker 1: joins us now she's US commercial real estate reporter for
Speaker 1: Bloomberg News. It is Today's a big Take. Check it
Speaker 1: out it Bloomberg dot Com and of course, and I
Speaker 1: big take on the Bloomberg terminal as well. Natalie, good
Speaker 1: to have you with us this afternoon. Laid out for us.
Speaker 1: If you take a stroll down Third Avenue in New
Speaker 1: York City, what do you see? Thanks for having me.
Speaker 1: So we go down Third Avenue. First of all, we
Speaker 1: see a lot of empty retail storefronts, indicating that a
Speaker 1: lot of retailers are not moving in because there's not
Speaker 1: enough workers on that corridor. And then you also see
Speaker 1: a lot of nineteen fifties to nineteen eighties office buildings
Speaker 1: that don't quite compare to the new one Vanderbilt by
Speaker 1: Grand Central or the Hudson Yard skyscraper that we see
Speaker 1: across the rest of the city. Souch is something that's
Speaker 1: nineteen fifties to nineteen eighties look like, is it just
Speaker 1: a fewer windows. It's not all glass that sort of thing.
Speaker 1: It's more of those glass buildings with punched out windows
Speaker 1: that don't necessarily have a lot of outdoor spaces. You know,
Speaker 1: if you go towards Hudson Yard you see some building
Speaker 1: the spirals going up. They have cast skating terraces around
Speaker 1: the building, but these ones not a lot of outdoor spaces.
Speaker 1: Looks a little bit outdated when you walk into the lobby,
Speaker 1: not a lot of amenities. So how much of it
Speaker 1: is like in the realm of all those reality shows,
Speaker 1: it's done for a makeover for all these office buildings.
Speaker 1: How much, though, is just a pandemic world and not
Speaker 1: everybody's going back to work. Um, It's it's both in
Speaker 1: the sense that right now in New York City we
Speaker 1: have less than fifty of workers that have returned back
Speaker 1: to work. Especially for Third Avenue buildings. A lot of
Speaker 1: tenants have rolled over releases and are not renewing them,
Speaker 1: so there's a lot of vacant spaces left. And then
Speaker 1: it's really costly for landlords to put in hundreds of
Speaker 1: millions of dollars to renovate an entire building. It's extremely
Speaker 1: hard to do that. People don't necessarily have the funds,
Speaker 1: and then on top of that, lenders may not necessarily
Speaker 1: want to help finance that either. At this point you
Speaker 1: mentioned financing. It's a big part of this story with
Speaker 1: the loans coming due in the coming years. How does
Speaker 1: that look for the office buildings that you took a
Speaker 1: look at for this pace? Just in general, a lot
Speaker 1: of lenders are really not keen on lending on any
Speaker 1: office buildings, some even for Class A let alone Class
Speaker 1: B offices that are not getting any traction at all
Speaker 1: from tenants. Where you know, landlords are struggling with maintaining
Speaker 1: costs because they have a dwindling rent rules. So it's
Speaker 1: not looking that promising for a lot of these landlords.
Speaker 1: How much is to also build at Like in a
Speaker 1: city like New York City, I feel like we've seen
Speaker 1: a lot of building continue, especially when it comes to
Speaker 1: commercial space, and there's just man, if I'm looking for space,
Speaker 1: I've got options and maybe nicer options and options that
Speaker 1: make more sense for how people are wanting to work.
Speaker 1: It's extremely competitive, I guess for landlords because you're right.
Speaker 1: There are a lot of new skyscrapers popping up. There's
Speaker 1: a lot of space that tenants have left behind, like
Speaker 1: really nice sublet space across even Hutson Yards, newly built
Speaker 1: out offices that these tenants aren't taking. And so people can,
Speaker 1: you know, have a look around Park Avenue fifth or
Speaker 1: Medicine for what they want. We're talking New York in
Speaker 1: a big way, but we do say this story's global,
Speaker 1: so broaden out for us in terms of what we're
Speaker 1: seeing around the globe. I mean, this is an issue
Speaker 1: happening across every major global city around the world. In
Speaker 1: our story, you can see vacancy rates have swored from
Speaker 1: across Toronto, Frankfurt, Tokyo, and Hong Kong. It's not an
Speaker 1: issue that's just common to New York. Okay, Natalie and
Speaker 1: I asked the question that everyone has been asking for
Speaker 1: two years. We have a housing crisis here in the city.
Speaker 1: Converting these office build things into homes easier said than done.
Speaker 1: I mean, the windows don't open, communal bathrooms on every
Speaker 1: floor like it's a tall task. Is it something that
Speaker 1: is even being considered. It's definitely being considered. People have
Speaker 1: been talking about it NonStop. But the problem right now
Speaker 1: is there's no legislation or tax incentives that makes it
Speaker 1: doable for these landlords. It's an extremely costly proposition. A
Speaker 1: lot of the buildings that could have been converted that
Speaker 1: you've seen downtown happen converted, and in Midtown you're full
Speaker 1: of these big block buildings that don't have a lot
Speaker 1: of sunlighter air in the core. And it's just really
Speaker 1: hard to make that proposition without having any tacks or
Speaker 1: financial incentives. So enter private public partnerships. Is that's what's needed.
Speaker 1: And I think about you mentioned you guys mentioned in
Speaker 1: your story about what happened post none eleven in terms
Speaker 1: of downtown Manhattan, and we needed to see those private
Speaker 1: public partnerships. Right. We saw thousands of apartments spring up
Speaker 1: um in place of those empty offices, and that's definitely
Speaker 1: something that people are talking because nobody wanted to work downtown, right,
Speaker 1: Nobody wanted to work downtown after nine eleven. Yeah, and
Speaker 1: it really wasn't a livable area as well. And now
Speaker 1: you go down there, it's seven neighborhood. One are the
Speaker 1: things I think about Tim during the pandemic, we all
Speaker 1: talked about, especially as as people obviously and had to
Speaker 1: flee their offices and then weren't coming back. Are we
Speaker 1: going to see some kind of commercial market crisis as
Speaker 1: a result. I don't know that it's yet played out
Speaker 1: in the financial markets, right, we haven't really seen it,
Speaker 1: but I feel like these conversations, how could it not?
Speaker 1: People have been talking about it for more than two
Speaker 1: years now, you know, with like loans coming to how
Speaker 1: much longer can can lenders extend the timeline for people?
Speaker 1: It's unclear one that's gonna unfold, But definitely there's more
Speaker 1: to come, you know, in terms of the mountain the
Speaker 1: market balancing out. Okay, thirty seconds. I'm wondering, Natalie, if
Speaker 1: if the economy does start to turn for the worst
Speaker 1: and we do see a labor market that it's a
Speaker 1: little softer, does it change with more people being asked
Speaker 1: to come into work. I mean, I think we've definitely
Speaker 1: already seen an increase in people coming back to work,
Speaker 1: But I don't know necessarily that you know, people being
Speaker 1: worried about being fired is going to suddenly turn around
Speaker 1: the entire office market. There's just too much office space
Speaker 1: and there's not enough demand alright. Hashtag new normal. J
Speaker 1: Powell says that I'm just leaning into it in a
Speaker 1: big way, right, so many different things. Um, what a
Speaker 1: great piece of reporting by you and our team. Natalie Wong,
Speaker 1: she's US commercial real estate reporter at Bloomberg News, joining
Speaker 1: us in our Interactive broker studio. Also check this one
Speaker 1: out online because it is very interactive and you can
Speaker 1: scroll through it geographically. It's very cool. All right, you
Speaker 1: are listening watching Bloomberg Business Week. Follow us here, which
Speaker 1: means a new docut of Supreme Court cases to be considered,
Speaker 1: everything from the right to vote, firmative action, gay rights,
Speaker 1: and even one involving Andy Warhol and prints so of
Speaker 1: a variety of topics. Joel Webber is the editor of
Speaker 1: Bloomberg Business Week. He's with us right now in the
Speaker 1: Bloomberg Interactive Brokers Studio. Greg Store is Supreme Court reporter
Speaker 1: for Bloomberg News. Check out Gregg story. It's available on
Speaker 1: the Bloomberg terminal and of course at Bloomberg dot com.
Speaker 1: Slash of business Week. It's all about the U S
Speaker 1: bracing for a new round of devices Supreme Court clashes.
Speaker 1: Joel Uh, we know the makeup of the court hasn't changed.
Speaker 1: Because Katagi Brown Jackson is replacing Stephen Bryer, So it's
Speaker 1: still firmly in a concern of it. Of camp any
Speaker 1: surprises ahead, Well, you're gonna see more of the same.
Speaker 1: So maybe that's a surprise depending on how you've been,
Speaker 1: how long you've been watching UM And and that was
Speaker 1: sort of what we uh we we we started talking
Speaker 1: to Greg about actually kind of like weeks or months
Speaker 1: ago now, because we saw the last term end and
Speaker 1: we knew that there was gonna be this next term,
Speaker 1: and we were like, you know, what's it gonna look
Speaker 1: like and what we and keep in mind how divisive
Speaker 1: last time was. Uh So what Greg came back with
Speaker 1: was basically like, boy, if you thought last time was divisive,
Speaker 1: like this time it's going to be more of the same.
Speaker 1: So so Greg tell us, um what you're somebody who
Speaker 1: who is all over Supreme Court coverage? We're gonna see
Speaker 1: sessions resume next Monday. What are you watching for? Well,
Speaker 1: as you said, more of the same, we're going to
Speaker 1: see the kind of divides At least we expect to
Speaker 1: see the kind of divides that we saw last term.
Speaker 1: There may not be a single day case case quite
Speaker 1: as big as the Job's case that overruled the constitutional
Speaker 1: right to abortion. But we're gonna have a huge college
Speaker 1: affirmative action fight coming up on October thirty one. There
Speaker 1: are a couple of very big voting cases involving partisan
Speaker 1: gerrymandering and so called racial gerrymandering. We've got cases involving
Speaker 1: gay rights and whether people have a business owners have
Speaker 1: a free speech right to uh to say I don't
Speaker 1: want to take part in the same sex wedding. All
Speaker 1: these things are the kind of cultural issues that you know,
Speaker 1: divide the country and divide the court increasingly in a
Speaker 1: conservative way to greg what's the what's the one that
Speaker 1: you think is going to be Probably, well, it's back
Speaker 1: up here, right like we've had this sort of court
Speaker 1: that was a little bit more balanced in decisions. What
Speaker 1: are the decisions, you know, the uses that you kind
Speaker 1: of just rattled up there where where where's the power? Imbalanced?
Speaker 1: Start to look like, well, you know, you look at
Speaker 1: the affirmative action case for example, that is actually two
Speaker 1: cases before the Supreme Court, one involving Harvard, one involving
Speaker 1: the University of North Carolina. And this case takes direct
Speaker 1: These appeals take direct aim at two thousand three Supreme
Speaker 1: Court decision that that reaffirmed that universities can use race
Speaker 1: as an admissions factor for the sake of enhancing diversity
Speaker 1: on campus. And that's something that the large majority of
Speaker 1: selective universities do. They say, if you overturn that, uh,
Speaker 1: it's going to have a devastating effect on their ability
Speaker 1: to make sure there's a significant number of black and
Speaker 1: Hispanic and Native American students on campus. Um. You know
Speaker 1: that that's a case where you can see this court's
Speaker 1: change of membership, the three Trump appointees who made the
Speaker 1: court more conservative. You can see that that that they're
Speaker 1: very likely going to make a difference. It's a case,
Speaker 1: actually we're Chief Justice with John Robberts, who we we
Speaker 1: know in some cases has not been willing to go
Speaker 1: as far as some of these conservative colleagues on this issue.
Speaker 1: He's kind of been in the vanguard saying, um, I
Speaker 1: believe in a color blind constitution. The constitution doesn't permit
Speaker 1: racial discrimination, and he has suggested he sees these race
Speaker 1: conscious admissions as racial discrimination. So, uh, you know, the
Speaker 1: Conservatives certainly go into that case with the upper hand.
Speaker 1: What's interesting there, though, is what we learned last time
Speaker 1: is that Roberts has maybe his own man on this court,
Speaker 1: and that you've got several justices to the to the
Speaker 1: right of him and several to the left. Uh. And
Speaker 1: and that also, you know, you have this line here that, um,
Speaker 1: the court faces at least the spectr of a legitimacy crisis,
Speaker 1: if not a full blown one. Talk about what that means,
Speaker 1: you know, the court going its own way here and
Speaker 1: and sort of America the American publics, uh, you know,
Speaker 1: reaction to that. Well, let's start with the American public's reaction.
Speaker 1: We've seen declining confidence in the courts, declining the Court's
Speaker 1: approval ratings, not surprisingly but noteworthy. Uh. That's especially with
Speaker 1: with Democrats. Overwhelmingly Democrats now say they disapprove of the
Speaker 1: Supreme Court. Um. And over the summer and a couple
Speaker 1: of different presentations, Justice Heelena kay In one of the
Speaker 1: liberal justices, without actually naming names and talking about particular cases,
Speaker 1: but she talked about what in her mind creates a
Speaker 1: legitimate legitimacy problem for a court. And she talked about, um,
Speaker 1: you know, if you have the same issue being decided
Speaker 1: a different way because the courts membership has changed, and
Speaker 1: one could certainly think about cases like the abortion cases
Speaker 1: as fitting into that category. Um. And so when you
Speaker 1: have a justice on the court, uh, you know, at
Speaker 1: least raising that that specter um. You know, it's certainly
Speaker 1: something for for you know, all of us to to
Speaker 1: pay attention to Creig. I want to dive into the
Speaker 1: elections that a little bit and how elections could shift
Speaker 1: under the Supreme Court. What what could they do specifically
Speaker 1: to make it so state supreme courts have a different
Speaker 1: hand in elections. Yeah, So there are two big election cases,
Speaker 1: and the one involving state supreme courts has to do
Speaker 1: with a North North Carolina redistricting fight. And so let
Speaker 1: me just back up for a second. Remember a few
Speaker 1: years ago, the Supreme Court said, we, the Supreme Court
Speaker 1: interpreting the U. S. Constitution, don't have authority to say
Speaker 1: that voting districts are so partisan or unconstitutional. They said
Speaker 1: that sort of partisan jurymandering claim doesn't fly in federal court.
Speaker 1: But they left open the possibility that a state supreme
Speaker 1: court could say, hey, under our state constitution, uh, these
Speaker 1: districts you've drawn are unconstitutional. And that's what happened in
Speaker 1: this North Carolina case, and now the question at the
Speaker 1: Supreme Court, and it could be a really far reaching one,
Speaker 1: is whether the the US Constitution limits what what what
Speaker 1: a state Supreme Court can do. The U. S. Constitution,
Speaker 1: when it talks about drawing districts and setting voting rules
Speaker 1: for congressional elections, says that the power to do that
Speaker 1: lies with the state legislature. Uh. And so the question
Speaker 1: is whether the North Carolina Supreme Court kind of overstepped
Speaker 1: its bounds in doing something that only the North Carolina
Speaker 1: state legislature can do. And and this issue could apply
Speaker 1: in a whole variety of context, potentially including presidential elections. Well,
Speaker 1: it's it's pretty wild. And when you think about personality
Speaker 1: and politics and how that potentially is has definitely shaped
Speaker 1: our our new Supreme Court or our latest U. S.
Speaker 1: Supreme Court. Hey guys, we get around. Greg Store, thank
Speaker 1: you so much, Supreme Court reporter at Bloomberg News from
Speaker 1: d C. And of course our thanks as always to
Speaker 1: the editor of Bloomberg Business Week, Jill Webber, the journal. Now,
Speaker 1: but you let me drive, no, no, no, all right, please,
Speaker 1: I want to try. It's good question. This is the
Speaker 1: drive to the close. On Bloomberg Radio. You are listening
Speaker 1: to Bloomberg Business Week and it is just about ten
Speaker 1: minutes away from that closing Vell Carol Master along with
Speaker 1: Tim Stanovic, we've got the perfect guest to talk about
Speaker 1: the market trade. I'm really curious about what he says
Speaker 1: about some of the macro trends that are out there.
Speaker 1: Let's get right to him. Alan Lance, director of research
Speaker 1: at Lance Global dot com, that's the president of Alan B.
Speaker 1: Lance and Associates, joins us right now on the phone
Speaker 1: from Toledo, Ohio. Allan, good to have you back with us.
Speaker 1: How are you good? Well? Thanks? Tom Okay. So we
Speaker 1: have tested and gone below the lows of earlier in
Speaker 1: summer June, I should say, uh, And now you have
Speaker 1: some strategies out there, like Mike Wilson saying that we
Speaker 1: could go down to thirty four hundred or three thousand
Speaker 1: on the SMP five hundred. He's over at Morgan stan
Speaker 1: What are you seeing ahead of your ahead for this year? Yeah,
Speaker 1: I think a lot of people, you know, because we've
Speaker 1: been negative thirting the year, and when we talked last
Speaker 1: month and into the rally, a nice rebound from June
Speaker 1: in August. Uh. You know, we said that we'd use
Speaker 1: that as a way to reduce exposure and risk for
Speaker 1: those that didn't sell last year at this time. UM
Speaker 1: and um, you know, even though the markets plunged, you
Speaker 1: know since then, UM, we're still not buying. I still
Speaker 1: see there's a ceiling on evaluations. There's too much uncertainty
Speaker 1: out there. I think we're going to get these negative
Speaker 1: you know, as far as forecast now, UM, my thought
Speaker 1: would be what were they saying a year ago more
Speaker 1: than what they're saying today. I think that's what you know,
Speaker 1: as far as a smart investors should really look at.
Speaker 1: But you know, we would be on their side right
Speaker 1: now as far as being negative. But we're are less
Speaker 1: negative than we were at the beginning of year. We
Speaker 1: get a big pullback, um, you know, sell off in
Speaker 1: into October, would actually be buying. What's a big this is?
Speaker 1: This isn't a big pullback because let me just about
Speaker 1: two numbers. SMP is down more than ten percent in
Speaker 1: September twelve, the past ten trading days, nasack one about
Speaker 1: in that time frame. And then if you go to
Speaker 1: another what I would deem maybe another key market point,
Speaker 1: the high before September twelve, which was mid August. For stocks,
Speaker 1: SMP is roughly down nearly fifteen percent since August sixteen,
Speaker 1: one hundreds than seventeen percents in August fifteen. So what
Speaker 1: would be more significant to the downside. Well, we're pretty
Speaker 1: much where we were in June, you know, and and
Speaker 1: and so we had a we had a rebound. I
Speaker 1: think it was artificial. People thought inflation was cured, you know,
Speaker 1: and and it was behind us, and and we talked
Speaker 1: you know that you know that that's definitely not the case.
Speaker 1: And and that's why you want to reduce risk. Now
Speaker 1: we're back to where we were in June. The things
Speaker 1: we were buying June, you know, getting into Goldman you know,
Speaker 1: around book value to seventies shaneer at one. They're still
Speaker 1: abolve that even though they're you know, with this splate
Speaker 1: is sell off getting close again. So so that's what
Speaker 1: I mean. If if if we saw the continue to
Speaker 1: sell off and those quality companies uh fell back to
Speaker 1: arranges that they were in June, and then we would um,
Speaker 1: you know, buy for for new new clients or for
Speaker 1: uh you know, investors that didn't take advantage of the
Speaker 1: sell off. But it's a matter just like in the
Speaker 1: beginning of your Carol being in the right areas. You know,
Speaker 1: energy has been good, it's fallen back. So so that
Speaker 1: would be an area that we would get into, uh
Speaker 1: in in into uh you know, a further sell off. Hey, Allen,
Speaker 1: I put out a Twitter Paul, pretty basic, not any
Speaker 1: kind of high econometrics going on our S d I
Speaker 1: S or whatever. But I said financial market capitulation is close,
Speaker 1: not close, no clue. At about thirty eight percent said
Speaker 1: it is it is close. Um do you agree or
Speaker 1: what would what would denote market capitulation in your view? Allen? Yeah,
Speaker 1: that's the problem is if everybody's expecting it, you know,
Speaker 1: and there are more you know net you know, Barish
Speaker 1: investors down, then there has been you know, at any
Speaker 1: time in recent history. And um, you know, so some
Speaker 1: of the technicals are looking to a point where you know,
Speaker 1: you could see a bounce back and what have you.
Speaker 1: But I'm just saying, uh, the earnings is just so uncertain.
Speaker 1: So if you have you know, one part of the
Speaker 1: price earnings ratio that that is so uncertain, it's it's
Speaker 1: really hard to value. And I think that's where you're
Speaker 1: not going to get any kind of you know, uh surge,
Speaker 1: you know, sustainable surge and and stock valuations. Um, you know,
Speaker 1: until some of these uncertainties clear, and and that's where
Speaker 1: you know, we we'd be buying into weakness, accumulating for
Speaker 1: the long term. Nobody knows where the bottom will be,
Speaker 1: but it's just a matter of you know, we're getting close.
Speaker 1: So to answer your Twitter poll, yeah, I think we're
Speaker 1: getting close. Whether we get a big dramatic sell off,
Speaker 1: you know, and and that's the capitulation everybody's looking for,
Speaker 1: whether it's uh, you know, just sustained drop. I think
Speaker 1: you know, we would be buying into this. We're two
Speaker 1: weeks ago we were saying, you know, I guess a
Speaker 1: lot of the media we're surprised we weren't buying, and
Speaker 1: we're saying, you know, we see a further plunge. We've
Speaker 1: we've seen a good plunge of last two weeks and
Speaker 1: and uh, I don't see anything to turn it real quick.
Speaker 1: But uh, you know, we're definitely getting close. And we
Speaker 1: might not get the compitulation, but by quality, and I
Speaker 1: think a year, you know, two years from now, you'll
Speaker 1: be happy you bought those areas and and uh, who knows,
Speaker 1: you know where the bottom will be. We we've never
Speaker 1: been good pick in the bottom even two thousand, you
Speaker 1: know eight Uh you know, we bought around the end
Speaker 1: of November and the market went down another four four
Speaker 1: months before bottoming. So but it was the same kind
Speaker 1: of rationale as buying Goldman book value and and and
Speaker 1: that tends to uh, you know, pay off if if
Speaker 1: you have a long term perspective, you know, Shanna, the
Speaker 1: same way we like natural gas, you know. So so
Speaker 1: the areas we're buying, I think we'll do well and
Speaker 1: it won't be as as bloody as as uh, you know,
Speaker 1: some some of these high salutin areas that still half
Speaker 1: risk to them even though they might be down. I
Speaker 1: guess the main thing for listeners is, you know, just
Speaker 1: because something down doesn't mean it's a bargain. And I
Speaker 1: because I mean, we're saying this on a day where
Speaker 1: we're seeing another fifty two weeks low, a fresh fifty
Speaker 1: two weeks love for Facebook down levels. Hey, just thirty
Speaker 1: seconds left, Alan, how long do you think we're sort
Speaker 1: of going to be in the midst of all this uncertainty,
Speaker 1: at least with the markets. I mean, do you see
Speaker 1: this lasting another four months, another two years? I see
Speaker 1: it at least through the mid terms, and and uh,
Speaker 1: there's just too much uncertainty. And if that, you know,
Speaker 1: clears things up a little bit, then then you could
Speaker 1: could see some stabilization. But if it doesn't, you know,
Speaker 1: then then you know, a lot of it will be
Speaker 1: predicated on Russia, Ukraine and and some of the geopolitical
Speaker 1: aspects that are still overhanging us. So so yeah, I
Speaker 1: could could be a while, but nothing I see, you know,
Speaker 1: before at least mid terms, if not beyond that. Yeah,
Speaker 1: the macro risk basket feels like it's pretty full at
Speaker 1: this point. Hey, Allan, thank you so much. As always,
Speaker 1: Alan Lance, He's director of research at Lance Global dot com.
Speaker 1: He's president of Allen B. Lance and Associates, joining us
Speaker 1: once again on the phone from Toledo. All hearts thanks
Speaker 1: for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,
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